ALL YOURS : Exclusive buyer's agents work only for consumers and often can save them money--and they don't cost more to hire

SPECIAL TO THE TIMES; Higgs is an Irvine free-lance writer

Twenty-four hours before she was to close escrow on a $135,000 condo in Santa Monica, Tracey Tapp broke into tears and fired her real estate agent.

The first-time home buyer was being pressured to close the deal even though her agent had been avoiding her persistent questions about the condo's aging roof, a defective heating system and Santa Monica's rent-control policies.

"I went to the agent one evening after work, and she handed me a three-inch stack of papers," Tapp, 32, recalled. "She said, 'You need to have these back to me tomorrow.' But the straw that broke the camel's back was when she still didn't have the answers to my questions. Instead, she said, 'Oh, let me write those down.' I lost it and started crying in her office. I was just so frustrated and so overwhelmed."

When her agent told her she was being too compulsive and expecting too much, Tapp walked out.

It wasn't until she called David Feigin of the firm Buyer's Agent of Ojai that she learned one possible reason her agent had been so elusive and so eager to close the deal. Feigin is an "exclusive buyer's broker," one of a small number of real estate agents in the state who represent only buyers and who do not list homes for sale.

Feigin explained to Tapp that because her former agent worked for the same company as the seller's agent, she was working as a "dual agent" and therefore obligated by law to represent the seller's interests.

"[Buyers] often think their agent is working for them," said Stephen Brobeck, executive director of Consumer Federation of America in Washington, which represents more than 200 consumer groups and advocates buyer agency. "They disclose to their agent what they are willing to spend on the house and their income--information which, if passed on to the seller, would greatly disadvantage the buyer."

Although most traditional agents say they try hard not to violate buyers' confidences, they see their role as bringing the two sides together, and they admit that sensitive information occasionally gets passed along. Experts advise both buyers and sellers not to tell their agents anything they do not want the other party to know.

In California, agents are allowed to be dual agents, representing both buyer and seller. They must disclose that information in writing to their clients as soon as possible before or at the same time as the buyer's offer to purchase, said Steve Sokol, an attorney for the California Assn. of Realtors, which sponsored state legislation to pass disclosure laws in the late 1980s.

The problem, say exclusive buyer's agents, is that the agent can wait until the buyer makes an offer on a house before disclosing who he or she represents. By then, the buyer often has fallen in love with the home and won't want to sever ties with the agent, he said.

"It's the most misconceived concept I've ever seen in the consumer world, especially since it's the largest purchase a consumer usually will ever make," said Steve Alexander, president and co-founder of the California Assn. of Buyer's Agents, a San Diego-based group that promotes consumer awareness of buyer representation. "If you were going through a lawsuit, you would never have a plaintiff and a defendant represented by the same attorney."

Agents who work for a traditional real estate agency and offer to represent the buyer exclusively can remain exclusive until they show the prospective buyer a home listed by their agency. That's when it gets tricky, said Pam Luckey, a traditional agent with Prudential California in Long Beach.

"It's wearing two different hats," said Luckey. "It's very difficult, but it can be done as long as you're being truthful and honest and representing both sides to the best of your ability."

But some consumers say they're not comfortable with the arrangement. "I just feel there's an agenda there somehow," said Lynne Yadlin, who used exclusive buyer's agents to purchase homes in New Hampshire and Irvine. "They're probably going to steer you toward their own listings or toward their company's listings."

When disclosure laws took effect in 1988, exclusive buyer agents became more common, increasing to an estimated 600 in California (there are no formal statistics) and about 3,000 nationwide. In the consumer-oriented '90s, the concept is slowly catching on, especially among educated and research-conscious buyers.

"It sure is the wave of the future," Luckey said. "We're seeing more and more of it. You find buyers who know more than we do. They're concerned about making a bad investment, how their property values have gone down."

Hiring an exclusive buyer's agent shouldn't cost any more than hiring a traditional agent, Brobeck said. Most are paid according to the normal commission structure, getting half the commission offered by the seller (usually 6% of the home's selling price). Others charge a flat fee or hourly rate or work on retainer.

"You're not saving money on the commission, but if you have a buyer's broker representing your interest, you're more likely to learn about any defect in the house and get a lower price," Brobeck said.

Exclusive buyer's agents are trained to point out a home's weaknesses and give the consumer warnings about economic conditions that may affect a particular neighborhood, said Barry Miller, co-founder of Buyer's Resource, a Colorado-based national franchiser of buyer's brokerages and the executive director of the National Assn. of Exclusive Buyer Agents, an industry trade group formed last February.

Buyer's agents are not tied to any particular property or agency, so they will show buyers any home, even those for sale by owner. In those cases, the buyer's agent may either get a fee from the buyer, negotiate with the seller for a commission or let the consumer go it alone.

Like traditional agents, they also help buyers find loan agents, home inspectors, insurance agents and other services, usually recommending several. But they also do things traditional agents won't do, said Gary Weiss of Santa Monica, who has used traditional agents as well as exclusive buyer's agents to buy homes around Southern California.

"Take loans. They run around and compare rates, work with the lenders on my behalf, do negotiating for me on securing a loan," Weiss said.

Buyer's agents may save the home buyer money by persuading the seller to pay for the appraisal or getting the lender to drop some fees, Miller said. They also may incorporate protective clauses into the buyer's offer, negotiating for a refund on the home inspection cost, for example, if the prospective buyer doesn't like the report, he said.

And buyer agents give their prospective buyers any incentives being offered. In about 25% of real estate transactions, sellers offer incentives to their agents, usually in the form of a bonus, if the agent can sell the home quickly. A traditional agent's company also offers incentives, like trips or bonuses, but buyers rarely know about them.

"We won't allowed that," Feigin said of exclusive buyer's agents. "If an incentive is offered, we always give it to the buyer."

When Tapp hired Feigin, he gave her the $800 incentive being offered and was able to knock $500 off for the painting of kitchen cabinets. "He also recommended strongly that I apply for two loans since it was such a short escrow," Tapp said. "It ended up saving me about $1,000, because the loans came in at the same time, and I was able to negotiate with them to knock off some points and fees." But it wasn't just the savings that impressed Tapp.

"I wanted someone to walk me through the process, step by step; someone who would return my phone calls, get my questions answered and get things done in a timely manner," Tapp said. "Basically, he did all that and saved me money."

Most buyer's agents require their clients to sign a contract specifying the maximum commission or terms under which the buyer's agent will be paid, the time they will work together and the client's wants and needs. Other agents are less formal.

"Being a trusting person, I try to take them at their word," said Jim Olsen, owner and broker at the Buyer's Agent of Orange County in Newport Beach. "I make good eye contact."

Some traditional companies report that home buyers are insisting on exclusive buyer agreements. They have responded by promoting their in-house buyer agents.

But Dave Osman, manager of Fred Sands Realtors in Brentwood, said few agents want to work with buyers only.

"In real estate you quickly learn that when you work with buyers, you become taxi drivers rather than wage earners," Osman said. "You can spend hours, days, weeks and even months with a buyer, and all of a sudden they decide they're not going to buy."

Perhaps that's one reason why exclusive buyer agency growth has been only moderate, said Tom Hathaway, founder and president of the Buyer's Agent Inc., a Tennessee-based franchiser of buyer's agents. Although the agents don't have the high advertising costs that selling agents have, buyer's agents make only about half the salary of traditional agents. ("In traditional real estate, there is always that chance that you might list that million-dollar home and also sell it and make that commission," he said. "That will never happen in buyer's brokerage."

Still, exclusive buyer's agents say they've created a niche. And such advocacy groups as the state and national associations are trying to pass legislation to abolish dual agency.

"Dual agency doesn't mean dual representation," the California association's Alexander said. "Your agent should determine the best possible price, the best terms, the best comparables, recommend lenders and [home] inspectors. Many agents will say they do that, but [if they do it well enough to benefit the buyer], then they are violating their obligation to the seller."

But Randy Brendia, southern regional manager of the California Department of Real Estate in Los Angeles, said he believes consumers probably do understand from the beginning who is representing them.

"They have to know that the person driving them all around town is being paid from someone, and they don't intend to pay out of their pocket, so it must be coming from someone," he said.

Real estate's powerful industry trade organizations--the California Assn. of Realtors with 106,000 members and the National Assn. of Realtors with 750,000 members--support dual agency, seller agency, buyer agency and exclusive buyer agency. Most of their members are traditional agents and brokers.

Critics of exclusive buyer's agents question how they can offer to get the best price for the consumer when their salary is based on the commission. But advocates say buyer's agents depend on referrals from customers based on their negotiating skills and ability to get the consumer the best price.

"I think the big advantage is you feel this person is working for you," said Yadlin, who used buyer's broker Olsen to find her a home in Irvine. "He knew what our price range was, and he kept to it. We kept trying to sneak up there, but he kept trying to steer us back down."

Sokol said it comes down to consumer choice.

"Whatever title someone gives themselves, you have to have a clear understanding of what that agent does and what aspects of the transaction the agent will help you with," Sokol said. "It's really a matter of selecting the relationship you are most comfortable with."


Questions to Ask Before You Select Buyer's Agent or Broker

--How long have you been a buyer's agent or brokerage?

--What percentage of your personal business and what percentage of your company's business is representing buyers? Is the balance of that representing sellers?

--How many buyers have you successfully represented in the last six months?

--Can I have names and phone numbers of three to six of your most recent buyer clients? I'd like two names of people for whom you started to work as a buyer's agent but for whom you are no longer working. Good agents aren't afraid of that question.

--What is your commission? Or do you have hourly rates or a set fee? Do you have ways to lower your commission? If I find a property through my own efforts, will you lower your commission?

--Do you have a list of home inspectors, insurance agents and reputable lenders for me to consider? (The agent should point you in the right direction. A good agent will recommend three and tell you to pick the one that best fits your situation.)

--How will you help us save money through the loan process?

--What clauses will you incorporate in our offer to protect us as buyers?

--Will there be a written contract? (A contract should spell out expectations and duties of and from the agent.) Can I have an attorney review it?

Source: Barry Miller, consumer advocate who founded one of the country's first buyer brokerages, Buyer's Resource.


For more information

California Assn. of Buyer's Agents: (619) 926-2222

Buyer's Resource: (800) 359-4092

The Buyer's Agent Inc.: (800) 766-8728.

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